HF Sinclair's (NYSE:DINO) Solid Profits Have Weak Fundamentals

Unsurprisingly, HF Sinclair Corporation's (NYSE:DINO) stock price was strong on the back of its healthy earnings report. However, our analysis suggests that shareholders may be missing some factors that indicate the earnings result was not as good as it looked.

View our latest analysis for HF Sinclair

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. HF Sinclair expanded the number of shares on issue by 33% over the last year. That means its earnings are split among a greater number of shares. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. Check out HF Sinclair's historical EPS growth by clicking on this link.

A Look At The Impact Of HF Sinclair's Dilution On Its Earnings Per Share (EPS)

We don't have any data on the company's profits from three years ago. On the bright side, in the last twelve months it grew profit by 741%. But EPS was less impressive, up only 654% in that time. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if HF Sinclair can grow EPS persistently. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On HF Sinclair's Profit Performance

HF Sinclair shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. As a result, we think it may well be the case that HF Sinclair's underlying earnings power is lower than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about HF Sinclair as a business, it's important to be aware of any risks it's facing. For example, we've found that HF Sinclair has 4 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of HF Sinclair's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.